Create your company

04 Jan

You need a business entity to represent yourself to the world. Even if you only have one product/service, your product needs to be created by a business entity. Your business entity will represent you legally to the government and your customers. Your business entity will own your business bank account and will be included in any customer-facing aspects of your business (SSL certificates, receipts, etc).

If you are already providing a product or service to customers under your own personal name, you actually already have a business. – it’s a Sole Proprietorship.

You can create your business entity (company) in a number of ways. I’m going to focus on the simplest and fastest way in this guide, but you can choose how to establish your company on your own. Keep in mind while reading this that you can re-establish your business in a different form in the future if you need to change the company’s organization (adding new co-owners/selling shares to investors).

One way you can organize your company is as a Sole Proprietorship (recommended).

In a sole proprietorship, the company is is you – it’s that simple. Uno, one, solo, sole,  just one person. A sole proprietorship is the fastest and easiest way to get started. You’ll claim your business profits as income on your 1040 (federal individual income tax filing) and Schedule C (profit or loss from business -attachment to your 1040). You can read more about taxes here.

I recommend starting as a sole proprietor because it is so simple. On relevant documents, you use your social security number instead of an IRS provided Employer Identification Number. There are no papers to file, so you can get started right away. Optionally (and recommended), you can file a DBA (Doing Business As) (more info) to legally give the company a nice easy name (e.g. “SoloStartup Widgets” rather than “Steve Smith”). You can file your DBA after you start the company, it is not a pre-requisite.

Getting started as a sole proprietorship is fast and easy, then later on, you can reform as a single-member of multi-member Limited Liability Company for business liability purposes.

or

($25/yr) Single-member LLC (less easy, but still easy)
Name your company and file the paperwork to create a business in the state/country that you will do business in. Typically this at least requires filing your Articles of Organization in your state. Google “articles of organization YOURSTATE”. I recommend either a) an ambiguous company name so that you don’t peg-hole the products that you’re able to develop or b) name your company the same name as your first product.

(free) Get your EIN. Register your company with the IRS to receive your Employer Identification Number (EIN). This is used for tax purposes.

Here is the link: [http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online](http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online)

Create a bank account at PNC bank for access to free checking. Get a debit card that can be used as a credit card. This will help you easily track expenses and income. Put $200 in the account to get you started for any expenses you’re going to have.

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